The normal development of lateral organs of the shoot requires the simultaneous repression of meristem-specific genes and the activation of organ-specific genes. ASYMMETRIC LEAVES2 (AS2) is required for the development of normal leaf shape and for the repression of KNOX genes in the leaf. AS2 is a member of the recently identified, plant-specific LATERAL ORGAN BOUNDARIES (LOB)-domain gene family. Expression of AS2 at high levels resulted in repression of the KNOX homeobox genes BREVIPEDICELLUS, KNAT2, and KNAT6 but not of the related SHOOT MERISTEMLESS gene. Overexpression of AS2 also led to a perturbation of normal adaxial-abaxial asymmetry in lateral organs, resulting in the replacement of abaxial cell types with adaxial cell types. These results indicate that AS2 is sufficient to induce adaxial cell fate and repress KNOX gene expression.